Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students

Overview

In this new Federal Reserve Bank of New York Staff Report, the results from a study of risk preferences suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of this paper support the traditional view that, at least on average, risk preferences are not affected by economic or social circumstances.